ArcelorMittal SA says it’s addressing the steel products shortage

Says all three of its blast furnaces will be operational again from January.
Ready to increase production - ArcelorMittal South Africa. Image: Waldo Swiegers/Bloomberg

JSE-listed steel producer ArcelorMittal South Africa is implementing a number of measures to address the critical shortage of steel products, which has severely negatively impacted the building and construction and manufacturing sectors.

ArcelorMittal SA group manager stakeholder engagement and communications Tami Didiza said the company aims to significantly reduce the temporary supply backlogs during December, which is traditionally a quieter period for the industry.

He added that the company’s second blast furnace in Vanderbijlpark will be restarted in December and, with all three of its furnaces fully operational from January 2021, ArcelorMittal South Africa “will be able to meet more than the steel requirements in South Africa and neighbouring countries”.

He confirmed that ArcelorMittal SA is experiencing temporary backlogs in supply, adding that a range of flat and long products are in short supply locally and globally from most steel mills.

Lockdown and ‘other factors’ to blame

These shortages are attributed to almost three months of lockdown-related disrupted production and “other temporary production delays caused by external factors”.

“There are increased lead times for the supply from steel mills around the world, with most mills now quoting delivery in Q1 of 2021 or for some specific products even into Q2 of 2021.

“Similar shortages are [being] experienced in many other industries and ArcelorMittal South Africa is also battling to receive certain input material,” he said.

Didiza added that the company ceased operations at all its blast furnaces as required by the Covid-19 lockdown regulations and completely stopped production “for the first time in the history of the integrated steel industry in the country”.

This resulted in an abrupt disruption in the entire steel supply chain, the effects of which the company is progressively addressing, he said.

Read: ArcelorMittal suspends dividend, drops global steel outlook

Didiza said the lockdown also resulted in depleted inventories at every stage of the supply chain and ArcelorMittal SA experienced a breakdown in August of the blast furnace at its Newcastle Works, which produces long products and was shut down for about four weeks for repairs.

But he added that ArcelorMittal has been alleviating the supply impact of this breakdown to its customers by supplying steel from its Vereeniging plant and expects to return to full operations at its Newcastle plant this month.

Lower-demand expectation proved wrong

Didiza said ArcelorMittal SA initially decided to temporarily idle its second blast furnace at Vanderbijlpark because of anticipated lower demand, which was based on customer input.

“However, certain short-term factors, such as lockdown-affected construction projects which are now being completed, increased sales at retail outlets and destocking [running at lower stock levels] in the steel value chain prior to the nationwide lockdown, have resulted in an increase in steel demand at a rate quicker than originally anticipated.”

ArcelorMittal SA has already announced plans to restart its second blast furnace at its Vanderbijlpark operations in December and Didiza says every effort was made to quickly resolve the problem at the company’s Newcastle operations.

SA faces more than just steel shortages

ArcelorMittal SA’s comments follow Moneyweb reporting this week that critical shortages of building and construction materials, including steel, cement, bricks and timber, are suffocating the sector’s recovery from the Covid-19 lockdown and diminishing its impact on the recovery of the economy.

Read: Critical shortage of building and construction materials in SA

The shortages, if they continue for an extended period of time, also have the potential to derail the government’s planned massive infrastructure investment plan to stimulate the economy post the Covid-19 lockdown, said David Metelerkamp, senior economist at construction market intelligence firm Industry Insight.

Read: Infrastructure a key part of economic recovery plan – Ramaphosa

ArcelorMittal SA failed to respond to a request for comment for that article.


Heunis Steel MD Anton Heunis was highly critical of ArcelorMittal SA and its management, claiming the shortage has led to companies starting to import steel from China and other countries, resulting in ArcelorMittal SA losing out on an opportunity in the South African market.

A Swaziland-based trading company said the shortage of steel products is also affecting the manufacturing sector, with one of its clients informed by ArcelorMittal SA two months ago that it will only be able to receive 30% of its forecast steel orders for the remainder of the year.

Moneyweb is in possession of a copy of a letter from ArcelorMittal SA advising customers that the price of various of its steel products would increase with immediate effect from October 1.

These increases ranged between 0.5% and 3% on all of ArcelorMittal SA’s zinc extras on all of its flat steel galvanised and colour products.

Government support questioned

In a reference to the tariff protection ArcelorMittal receives from the government, the trading company said: “Mittal is unfortunately doing more damage to the downstream manufacturers and is being supported by the government.

“They are unfortunately holding all manufacturers to ransom. We have had a price increase every month from them and they are not able to even give us anywhere close to our demand.

“Many are turning to importing but it is a three- to four-month turnaround time, which means lots of lost sales that will be going to imports because our customers are irritated that we cannot supply,” the company said.

Heunis echoed these comments, stating that the international steel price in US dollars has in the past four months increased by 5.2% and claimed ArcelorMittal SA’s price is increasing by 9% in January 2021.

Artificial shortage?

“So they have created a shortage, maybe that was also artificial, and the demand, just so that they can increase their price and create an opportunity to basically rip us off a bit more,” it said.

Didiza said on Tuesday that ArcelorMittal SA’s base prices for flat products have increased year-to-date on average by between 19% for hot-rolled coil and 28% for coated products.

But he stressed that the prices for flat products are governed by the fair pricing principles agreed with and monitored by the government, while the long products prices have followed the local price trends in the South African market.

He said there are multiple suppliers in South Africa of long products, which are mostly used in the infrastructure and construction sectors and are also in short supply.

Didiza added that steel prices in global markets have risen by around 15% and in some markets significantly more.

The fluctuations in ZAR/USD exchange rate have been a larger driver of rand-denominated price increases in the local market and the rand has depreciated by about 15% through 2020, he said.

In regard to the increases in its zinc extras, Didiza said international zinc prices have been volatile in 2020 and increased by about 30% to 35% since April.

This, on top of the sharply depreciating rand, has resulted in ArcelorMittal SA passing a cost-relevant increase to its customers, he said.

Didiza said ArcelorMittal SA has not yet announced any price changes for January 2021 for its base prices or extras for both flat and long steel products.

“This will be reviewed with any price movement – upward or downward – as dictated by the pricing principles,” he said.


Didiza declined to comment on claims that ArcelorMittal SA is using the steel products shortage to increase prices, claiming this is “rumour or hearsay”.

“We are doing our best to maintain critical supply of steel in the domestic market while bringing back additional capacity as soon as possible to address the temporary backlog, which is largely because of the depleted stocks in the entire steel supply chain, and meet the unanticipated increase in demand.

“As part of the South African steel sector, ArcelorMittal South Africa remains committed to working and collaborating with all stakeholders to ensure the entire steel manufacturing supply chain continues to play an active role in rebuilding a thriving South African economy,” he said.

Read: ArcelorMittal SA plans job cuts



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Import from China.

Much cheaper.

Maybe renationalize it and change its name to Iscor.

If you nationalise it, it will be another SAA or Denel.

The high electricity costs and the discontinued preferential iron ore prices from Kumba is what brought this company down.

In its good days, it employed over 33,000 people, down to under 6000 now.

They should never have agreed to let Mac Steel derive all sales revenues. This is part of the previous administrations’ “State Capture”.

They needed those revenues for the entity to be completely profitable.

Not very smart are they?

Part of the problem being the commie anc using taxpayer money to fund via the DTI a host of small steel producers only producing the low end products. Tax money squandered on Cisco in Cape Town and a host of others in Gauteng.

I heard from a reliable source last week that the retrenchments coming in the next few months at AMSA are preparation for the sale of both V de Bijl and Newcastle works to China, probably Sinosteel, who have a major presence here already. Then the commies have total control.

End of comments.



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